Commercial Solar: The Good, The Bad and the Downright Challenging

As the price of solar panels continues to drop–they're already 80% lower then in 2008–more commercial companies are finding several reasons to switch over. Actually, make that several billion reasons. The commercial sector consumes more than 1.3 trillion kWh each year, and since the average electricity rates for commercial users have inched up more than 20% in the past 10 years—from $0.08/kWh to more than $0.10/kWh—that adds up to an increase of tens of billions of dollars in utility bills. So it definitely makes sense for companies to generate their own electricity. So much so, that it could become the top source of electricity by 2050.

The Challenges

But while the benefits are promising, there are still some challenges. For starters, there's always a possibility that Congress won't extend a 30% tax credit for solar power beyond 2016. That would deliver a financial blow to commercial and utility scale projects. Meanwhile, smaller commercial companies are already facing the hurdle of high upfront costs. Fortunately, solutions like third-party ownership—where a third-party takes on the initial costs of designing, constructing and owning the solar system, then sells the electricity to the customer at lower rates—help mitigate that problem.

Then there's the issue of land. The National Renewable Energy Laboratory (NREL) estimates that a 100% solar America would require solar installations on up to about 0.6% of the country's total land area. Or roughly the size of West Virginia.

Granted, it's less than 2% of the nation's farmland, but it's still a lot. So where do you find all that space? Converting brownfield sites can be expensive, and there's a whole other set of issues for developers looking to convert farmland or natural areas. They're experiencing pushback not only from wealthy NIMBYers who don't want obstructed views, but also from wildlife conservationists concerned about destroyed habitats. For instance, a 90-acre solar farm planned by Six Flags Great Adventure in New Jersey was recently panned for destroying a forest. The Moapa Band of Paiutes tribe was careful to address these types of concerns, making up for 75 displaced desert tortoises on a 2,000-acre solar development site by creating a separate 6,000-acre conservation area for them. Similarly, SunPower in San Jose, CA, hired biologists to make arrangements to accommodate the San Joaquin kit fox, giant kangaroo rats, pronghorn and Tule elk affected by their California Valley Solar Ranch. They also set aside 12,000 acres for conservation. 

Points to Ponder

Commercial developers looking to go solar have a lot to consider to determine the potential ROI. It's important to get a good idea of how much energy can actually be generated on your particular site. For example, Ivanpah Solar Electric Generating System near the California-Nevada border ended up producing about half as much energy as expected in 2014, simply because the sun wasn't shining as much as they thought it would. (It's worth noting that Ivanpah uses a different technology for their PV panels than what's normally used.) You also want to check out the incentive programs and rebates in your area, know the zoning laws, and keep in mind that solar panels, like anything else, have a "useful life" that diminishes over time. Additionally, solar panels tend to have a longer life than commercial roofs, which means roof repair should also be factored into the cost.

The Torchbearers

Walmart is the top overall installer of solar, because they have the most surface area for installations, but IKEA actually has a much larger percentage of its overall capacity, and it has the most geographically diverse usage. 87% of IKEA's facilities have solar power, compared to 43% of GM, which is in second place. Walmart has the highest number of installations, at 254, but that only equates to 5% of their facilities. Other large users of solar include Walgreens, Kohls, REI, Whole Foods and Macy's.